October 2024 -
As of 30 September 2024
Out of the Woods
The Chinese equity market is up nearly 30% since announcing a larger‑than‑expected stimulus package intended to help stave off further deterioration in growth and quell concerns about its troubled property sector. The coordinated efforts of the People’s Bank of China and financial regulators span across monetary and fiscal measures, including lower rates to support housing and loans to encourage share buybacks. Chinese equities have been a notable laggard this year, reflecting the struggles of policymakers to reverse slumping growth and falling well short of their 5% growth target. And with the potential threats of a shift in US policy on the horizon, their export‑heavy economy could find itself under more pressure. So, while the far‑reaching measures are a step in the right direction and have been cheered by emerging market investors, the structural headwinds facing China are vast, leaving many skeptical that China is out of the woods just yet.
Hold the Bubbly
Amongst major central banks, the ECB just saw its first read on inflation below its 2% target, down from an 11% peak in September 2022, freeing up the path to lowering rates further. This is welcome news for other central banks as well, which are seeing similar progress toward their targets. Notably, this progress is being achieved while global growth is holding up, with some areas showing surprising resilience. The forces that had driven inflation higher, including COVID‑related supply shortages, excess savings supporting consumer spending and unleashed pent‑up demand driving services inflation, have faded. By all measures, it is looking like central bankers may have pulled off the once unthinkable ‘soft landing’ and should be celebrating. But, unfortunately, the current backdrop of geopolitical tensions and the threat of policy shifts having an impact on growth and possibly reigniting inflation concerns has them holding off on popping the bubbly, for now.
For a region-by-region overview, see the full report (PDF).
Yoram Lustig is the head of Multi-Asset Solutions, EMEA and Latin America, in the Multi-Asset Division. He also is a portfolio manager and the chair of the UK and European Investment Committees.
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